Social Media: Who Owns The Rights?

Social MediaIt is no surprise that companies today actively encourage their employees to engage in marketing and business development through use of social media outlets like Twitter and LinkedIn. But when an employee decides or is asked to leave the company, a dispute can, and with increasing frequency likely will, ensue over who owns these social media accounts. They were created and developed on company time with company resources, seemingly making them a company asset. The followers (or connections in the case of LinkedIn) of such accounts are, however, unique to the individual employee. They follow the tweets of the employee typically without regard for the identity of that employee’s company. It is these followers and connections that are the real essence of social media from a marketing perspective. So, who gets the rights to these accounts? Are they an asset belonging to the company simply because the company provided the capital? Or are they really the personal goodwill of the individual employee? These issues are at the center of two unrelated lawsuits, filed only days apart, now pending in the federal courts of Pennsylvania and California.

In the Pennsylvania case, Linda Eagle filed suit against her former company, Edcomm, Inc., and a group of its new owners and employees for a variety of business torts stemming from being locked out of her LinkedIn account after she was fired. Eagle claims Edcomm hijacked her LinkedIn account, changing the password and account profile to display the new CEO’s name and picture, but maintaining Eagle’s honors, awards, recommendations and connections. Defendants responded with a counterclaim against Eagle also asserting a variety of business tort claims, including conversion, misappropriation, violation of the Pennsylvania Unfair Trade Secrets Act, tortious interference with business, and numerous others. Eagle moved to dismiss the counterclaim. As it relates to the LinkedIn account, the federal court in Pennsylvania ruled that the LinkedIn account connections are not trade secrets under the Pennsylvania statute, but declined to dismiss the common law count of misappropriation of an idea. According to the court, there was a dispute of fact regarding the role Edcomm versus Eagle played in developing and maintaining the LinkedIn account that influenced the viability of misappropriation claim. Eagle v. Morgan, Civil Action No. 11-4303, 2011 U.S. Dist. LEXIS 147247 (E.D. Pa. Dec. 22, 2011).

Owns Rights

The California case is the reverse of Eagle. Noah Kravitz was employed by PhoneDog, a mobile phone review site. While there, he created a Twitter account gradually amassing nearly 17,000 followers. Kravitz decided to leave PhoneDog and changed his Twitter handle from @PhoneDog_Noah to @noahkravitz. PhoneDog sued Kravitz for misappropriation of trade secrets, conversion and other business torts, all arising out of his departure with the Twitter account. Kravitz’s followers were likened by PhoneDog to a customer list since PhoneDog requires its employees to tweet links to PhoneDog’s website in hopes of directing traffic to the site and thereby create advertising revenue. Unlike Eagle, the Kravitz court has declined to dismiss the trade secrets and conversion counts on motion to dismiss finding the claims to be adequately pled. In another order entered on January 30, the Kravitz court also refused to dismiss PhoneDog’s intentional interference and negligent interference with prospective economic advantage claims. The court acknowledged Kravitz’s concern that Twitter followers may not be “economic relationships” for purposes of these business tort claims, but declined to rule on this issue. The court held that because PhoneDog had also pled economic relationships with its advertisers, the claim was adequately pled and the issue regarding the status of the Twitter followers was one more appropriately left for summary judgment. PhoneDog LLC v. Kravitz, 11-cv-03474 MEJ (N.D. Calif.).

The outcome in both these cases will be instructive to businesses hoping to maintain ownership of their social media accounts. One thing is already clear, however. The more engaged the company is with developing and maintaining the content for such accounts and the more a company does to track revenue derived from such accounts, the better the company’s chances are for having a viable claim to the accounts later.

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The Military Spouse’s Residency Relief Act

Military SpousesThe new Military Spouse’s Residency Relief Act may raise questions for many employers about the tax treatment of wages for the spouses of active duty military personnel. The MSRRA could have a particularly notable impact in military heavy states like Virginia.

In short, the MSRRA exempts from state income tax the wages of the spouses of military personnel who move into a state to be with their service member spouse, even if that state otherwise would impose an income tax on the employee. The wages the employee earns will be exempt from state withholding. Additionally, even if the military spouse is outside the United States, the employee’s earnings are exempt from state withholding so long as the service member’s absence is in compliance with military orders.

The Act, as we understand it, is effective for any state or local income tax return beginning with a tax year that covers November 11, 2009.

(To ensure compliance with IRS requirements, readers are advised that any tax advice contained in this overview of the MSRRA was not intended to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or applicable laws, or promoting, marketing or recommending to another party any matter addressed herein.)

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Gender Explicit Language Is Enough for Hostile Environment Case

Women-and-sexual-harassment-at-the-workplaceThe Eleventh U. S. Circuit Court of Appeals, in Reeves v. C. H. Robinson Worldwide, Inc., recently gave the go-ahead for a woman’s hostile work environment claim based on the pervasive use of sexually explicit language in the workplace. Of particular interest in the case, the offensive language was not directed at the claimant.

The claimant worked as a transportation sales representative for a shipping company. She was the only woman working in the sales area with six male co-workers. The work spaces were open cubicles. The sales workers could overhear each other.

The use of sexually crude and offensive language in the sales area was daily. Sexual jokes and comments and derogatory references to women (such as “f_ _ _ing b_tch”) were prevalent and casually used. The claimant overheard the men frequently discussing sexual antics of all kinds.

The men also listened to a raunchy morning radio program each day that routinely discussed , erotic behavior, the breast size of female celebrities, and similar topics. The claimant was told she could change the radio station, but each time she did, the men changed the station back.

The claimant sought help from immediate supervisors and formally complained to upper management, but the atmosphere in the workplace did not change. The claimant then resigned her employment and initiated legal action alleging sexual harassment. The trial court surprisingly (to my thinking) granted summary judgment for the employer, dismissing the case, finding the offensive language was not directed at the claimant based on her sex and therefore was not actionable.

Hostile Environment

The appeals court reversed the trial court’s ruling. It recognized that offensive language need not be targeted at the claimant in order to support a hostile environment claim. Indeed, the Supreme Court has clearly established that race-based conduct which materially alters an employee’s job is illegal even if the conduct is not directed at the individual in question. Gender-based conduct, actionable under the same statute, should not be analyzed differently.

Incredibly, some commentators have criticized this decision on First Amendment free speech grounds. Such criticism ignores the well established legal principle that offensive language concerning protected characteristics can be restricted, particularly in private workplaces. Employees are not free to make pervasive race or -based comments in the workplace. -based comments are no different. The workplace rarely, if ever, can be viewed as a public podium for unfettered free speech.

Ultimately, there is no legal substitute for employers to have a strong policy against this kind of workplace behavior, to enforce the policy, and to stop such conduct before it pervades the workplace.

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Meal Break Risks Under Federal Wage Laws

Wages LawMissed meal breaks in the workplace are coming under increasing legal scrutiny.

To be clear, an employee has no absolute entitlement to a meal break under federal wage laws (although this may be different under some state laws). But, if an employee is given a meal break period, either the employee must be completely relieved from his or her duties for more than twenty minutes, or the employee must be paid for the break time.

In many instances, employers unintentionally fail to pay employees for compensable meal breaks. In this day of pressure to raise workforce productivity, many employees are called to return to work temporarily during a break, disrupting the time during which the employee is supposed to be completely relieved of duties. As a result, the actual break period does not last the requisite uninterrupted time, and thus the employee legally should be paid. Some employers simply do not recognize this situation, and others have set time clocks to deduct automatically the standard meal break time each day without regard to whether the break period was taken without interruption, or even taken at all.

The problem for employers is compounded because, not only should the employee be paid for the interrupted or untaken meal break, but that time also may push the employee over the threshold for overtime wages for the workweek. If the employer does not pay overtime owed, it potentially has committed two violations.

Unpaid Wages

Additionally, defending unpaid wage claims of this nature are particularly difficult because the employer, admittedly, will not have accurate record of the time actually worked.

The Department of Labor and legal counsel for employees are aware of these compounding problems for employers, and at least in the latter case eagerly will take advantage of these problems. It is not enough that some employers mandate in their policies that a break be taken. The employer must either strictly enforce meal breaks or else monitor employee work time on a daily, case-by-case basis, without automatically deducting time for any scheduled breaks.

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Thompson v. North American Stainless, LP: Title VII’s Retaliation Protections Extend to Third Parties

Supreme Court of the United StatesOn January 24, 2011, the Supreme Court of the United States unanimously extended Title VII’s protections to an individual who was terminated after his fiancee filed a charge of discrimination with the Equal Employment Opportunity Office.

The facts of the case are relatively straight forward. Until 2003, both petitioner Eric Thompson and his fiancee, Miriam Regalado, were employees of respondent North American Stainless (NAS). In February 2003, the Equal Employment Opportunity Commission (EEOC) notified NAS that Regalado had filed a charge alleging discrimination. Three weeks later, NAS fired Thompson. Thompson complained that he had been fired in retaliation for his fiancee’s discrimination charge.

The District Court granted summary judgment to NAS, concluding that Title VII “does not permit third party retaliation claims.” 435 F. Supp. 2d 633, 639 (ED Ky. 2006). After a panel of the Sixth Circuit reversed the District Court, the Sixth Circuit granted rehearing en banc and affirmed the District Court’s opinion. 567 F.3d 804 (2009). The court reasoned that because Thompson did not “engag[e] in any statutorily protected activity, either on his own behalf or on behalf of Miriam Regalado . . . [he] is not included in the class of persons for whom Congress created a retaliation cause of action.” Id., at 807-808.

In ruling, the Supreme Court addressed the main concern with affording a fiancee protection under Title VII. NAS argued that allowing a fiancee to sue would open the floodgates to retaliation lawsuits from everyone with any connection to a complaining employee. However, the Court stated that “we do not think [this concern] justifies a categorical rule that third-party reprisals do not violate Title VII.” The Court then “decline[d] to identify a fixed class of relationships for which third-party reprisals are unlawful.” Instead, the Court stated that it will “depend on the particular circumstances.” The Court elaborated that “firing a close family member will almost always meet the standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so.” Beyond that the Court declined to comment.

Retaliation

Once the Court held that certain aggrieved third parties had standing to bring a claim, it determined that Thompson clearly falls under the category of people who can sue for retaliation. The Court stated, “Thompson is not an accidental victim of the retaliation – collateral damage, so to speak, of the employer’s unlawful act.” “To the contrary, injuring him was the employer’s intended means of harming Regalado. Hurting him was the unlawful act by which the the employer punished her. In these circumstances, we think Thompson well within the zone of interests sought to be protected by Title VII. He is a person aggrieved with standing to sue.”

Based on this ruling, it is clear that courts will carefully consider the factual circumstances involved in each case. If a third party can factually assert that their adverse employment decision falls within the “zone of interests” sought to be protected by Title VII, then Employers will have difficulty obtaining summary judgment.

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New Posting Requirement For Federal Contractors

Government ContractThe U.S. Department of Labor has issued a final rule specifying the contents of a new required notice for federal contractor and subcontractor employees. The notice, to be titled “Notification of Employee Rights Under Federal Labor Laws,” is intended to advise employees of their rights under the National Labor Relations Act.

The details of the notice are prescribed by the DOL. Among other things, contractors are required to advise employees specifically that they have the right to “organize a union to negotiate” with their employer, to “form, join or assist a union,” to “bargain collectively” and “take action to improve working conditions,” and to “choose not to do any of these activities.” The required notice also specifies various employer and union activities that are illegal during employee efforts to organize. These prohibited activities are well known to labor lawyers, but may take some employers by surprise.

Importantly, where a significant portion of a contractor’s workforce is not proficient in English, the contractor must provide the same notice in the language of those employees. Copies of the notice, including translations in many languages, are available from the DOL’s Office of Labor-Management Standards.

The new regulation applies to new federal contracts beginning June 21, 2010. Notably, however, the regulation, and hence the posting requirement, does not apply to prime contracts under $100,000 or to subcontracts below $10,000.

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FLSA Amended To Require Breast Feeding Breaks

Feeding BreakThe new 2010 health care law, formally known as the Patient Protection and Affordable Care Act, will affect employers in a variety of ways in the coming years. One provision, which received virtually no attention during the months before passage of the new law, will surprise many employers now.

Section 4207 of the new law amends section 7 of the Fair Labor Standards Act (the federal law on minimum wages and overtime entitlement) to mandate now that employers provide “reasonable break time” for a mother to “express breast milk for her nursing child” for up to one year after the child’s birth. Importantly, the break time for this purpose does not have to be paid (unless applicable state law requires), but we expect that many employers will not want to undertake the effort to police employee time in this activity.

The FLSA amendment also requires employers to provide mothers a suitable place other than a bathroom for the purpose of expressing breast milk. The designated place, appropriately, must be private, shielded from view, and free from intrusion by others in the workplace.

The new law applies to all employers subject to the FLSA. However, an employer with less than fifty employees may side-step compliance if these requirements impose an undue hardship on the employer. Presumably, it will be the employer’s burden to show undue hardship by demonstrating significant difficulty or expense.

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Will Spear Stick?

Washington Airport AuthorityIn the months following Judge Chamblin’s August 2009 ruling in Spear v. Metropolitan Washington Airports Authority, defense counsel across the Commonwealth jumped on the Spear bandwagon, arguing as the Court ruled in Spear that changes in suits re-filed by a plaintiff after taking a voluntary nonsuit, such as to the ad damnum, create a different action and the plaintiff accordingly loses the benefit of the tolling of the statute of limitations provided by Va. Code § 8.01-229(E)(3). But so far, no other court has followed Spear. Now, the Supreme Court of Virginia is poised on February 9 to review the petition for appeal in Spear. The question on every defense counsel’s mind is can this decision possibly hold up?

In Spear, plaintiff claimed she was injured in April 2005 at Washington Dulles International Airport while being transported by wheelchair. Plaintiff filed suit in April 2007, within days of the applicable two year statute of limitations, but took a voluntary nonsuit in October 2008. When plaintiff re-filed her action in March 2009, with an increased ad damnum from $350,000 to $500,000, defense counsel argued the claim was time-barred because the change in the ad damnum created a different action. Judge Chamblin agreed.

Adopting a strict reading of Dalloul v. Agbey, 255 Va. 511 (1998), Judge Chamblin held that the “action” that was nonsuited for purposes of § 8.01-229(E)(3) is the action that was pending at the time the nonsuit order was entered and it is that “action that must be recommenced within the six-month period in order for the tolling provision to apply.” According to the court, because a plaintiff’s recovery is limited by its ad damnum (but see post above on legislation considered by the General Assembly that would have dramatically changed this rule) and because Va. Code § 8.01-379.1 requires disclosure of plaintiff’s damages to the jury, “the amount sued for is just as much a component of an action as the operative facts alleged and the claims made by a plaintiff.” For these reasons, Judge Chamblin ruled that plaintiff’s March 2009 complaint was not the same action as the April 2007 complaint and the claims were therefore not tolled by Va. Code § 8.01-229. The new complaint was dismissed as time-barred.

While the Spear court ostensibly considered the meaning of “action” for purposes of Va. Code § 8.01-380, it overlooked a substantial body of Virginia Supreme Court precedent defining and discussing the term “cause of action” in other related contexts. Virtually every other court reviewing similar nonsuit tolling issues under § 8.01-229(E)(3) has done just this. (See, e.g., Vaughan v. The First Liberty Ins. Corp., Civil Action No. 3:09cv364 (E.D. Va. Nov. 13, 2009); O’Hearn v. Mawyer, Case No. CL09-00442 (Rockingham Cty. Jan. 7, 2010) (collecting cases)). Had the Spear court also done so, the result may have been far different.

The term “cause of action” has been considered repeatedly by the Supreme Court of Virginia in the closely analogous context of relation back of amendments (that is, whether an amended pleading relates back to the original filing date for purposes of statute of limitations), as subsequently codified at Va. Code § 8.01-6.1. In this setting, it is clear the Court views a “cause of action” broadly to encompass “a set of operative facts which, under the substantive law, may give rise to a right of action.” (See, e.g., Roller v. Basic Constr. Co., 238 Va. 321 (1989)). It is not any one single legal theory or basis of recovery. Where an amended pleading “only varie[s] the mode of demanding the same thing – that is, damages done the same property by the same causes”, then it does not set forth a new cause of action. (Vines v. Branch, 244 Va. 185 (1992), quoting, New River Min. Co. v. Painter, 100 Va. 507 (1902)).

Likewise, while the goal of res judicata is to preclude, rather than preserve all claims that could or should have been litigated, the definition of “cause of action” still remains the same. Rule 1:6 of the Rules of the Supreme Court of Virginia again defines “cause of action” broadly to be a “claim for relief arising from identified conduct, a transaction, or an occurrence”, regardless of the legal theory asserted or the legal elements or evidence necessary. A “cause of action” is clearly intended by the Supreme Court to be an all-encompassing concept.

This expansive definition of “cause of action”, particularly when coupled with the additional rule that “tolling statute[s] . . . ‘are highly remedial and should be liberally construed in furtherance of their purposes, and are not to be frittered away by any narrow construction,’” (Vaughan v. The First Liberty Ins. Corp., quoting, Baker v. Zirkle, 226 Va. 7 (1983)), leaves only one possible conclusion. Spear should have been decided the other way. It is difficult to conceive how the mere demand for $150,000 in additional compensatory damages would not satisfy the test for the same “cause of action” within the meaning of §§ 8.01-229(E)(3) and 380.

To be sure, there is authority for the proposition that the recovery sought is material to the analysis of “cause of action”, just as Judge Chamblin noted. For example, in Vines, the Court held that “[w]here an amendment . . . makes a new or different demand not introduced in the original [complaint] . . .. the amended action becomes the equivalent of a different suit and the statute continues to run until the amendment is filed.” Under this caselaw, to the extent the increase in damages sought by plaintiff in Spear in the amended pleading actually arose out of some additional category of damages not previously requested, then perhaps the result in Spear is correct. However, there is nothing in the Spear opinion which would support this conclusion.

Will Spear Stick

The ultimate irony is that had plaintiff’s counsel in Spear anticipated this novel nonsuit challenge, it could have easily re-filed a complaint that was identical to the April 2007 version, and then simply moved to increase the ad damnum thereafter. As Judge Chamblin expressly acknowledged, such motions are routinely made “as they must be”, and granted by the court, where plaintiff believes and demonstrates damages may exceed the amount originally pled.

From the defense perspective, the Spear rule is almost too good to be true since nearly every case re-filed after a nonsuit contains some change in allegations or claims. Pre-Spear, it could be argued that it was a breach of the standard of care for plaintiff’s counsel to not tweak some aspect of the complaint to reflect information acquired during or subsequent to the litigation of the first complaint. But, by all indications, plaintiff’s counsel should not be hasty in adjusting nonsuit re-filing practices since Spear may be short-lived.

Of course, if the Supreme Court of Virginia declines review of Spear, the state of the law of nonsuits will be left in doubt and the circuit courts of this Commonwealth can be absolutely assured of one thing: they will routinely see Spear-based pleas in bar. Indeed, defense counsel may now well be required to file a Spear like challenge in order to satisfy its standard of care.

Certainty is needed for both sides of the bar on this issue.

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Changes to Virginia Corporation Annual Registration Fees

Virginia CorporationBeginning July 1, 2010, annual registration payments made by a corporation will be applied first to any previously unpaid annual registration fees and/or penalties and then to currently assessed fees. This change is a result of an amendment to the Code of Virginia. Prior to the amendment, registration fee payments were applied first to currently assessed fees and then to unpaid penalties.

As a result, a termination of corporate existence may occur notwithstanding a Virginia corporation’s payment of current registration fees. See the Virginia State Corporation Commission’s website for more details.

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